Good morning, everyone, and welcome to our business update conference call. I'm Arnold Donald, President and CEO of Carnival Corporation & plc. Today, I'm joined telephonically by our Chairman, Micky Arison as well as David Bernstein, our Chief Financial Officer; and Beth Roberts, Senior Vice President, Investor Relations. Thank you all for joining us this morning. Now before I begin, please note that some of our remarks on this call will be forward-looking. Therefore, I must refer you to the cautionary statement in today's press release. We are absolutely thrilled to be back doing what we do best, delivering amazing, memorable vacation experiences to our guests. Our team members are overjoyed to be back on board and it shows, our guests are having a phenomenal time. Our onboard revenues for guests are off the charts, and our Net Promoter Scores have been exceptionally strong. I've had the pleasure of visiting a number of ships in recent weeks, both here in the U.S. and abroad. And I can tell you, the ships look spectacular, and the crew has an amazing energy. There is such an incredible spirit on board. Our protocols have been working well, beginning with a seamless embarkation experience and have enabled us to build occupancy levels at a significant pace as we return more ships to service. Our brands executed extremely well in this initial phase of our return to serve, particularly given significant restrictions on international travel, hampering our ability to offer our normal content risk deployment options as well as the operating requirements in certain jurisdictions that limit our normally high occupancy levels. Now our itinerary planners came up with creative deployment alternatives, our marketing department made them accessible with little investment. Our yield managers price them appropriately to achieve occupancy targets very close to them…

Thank you, Arnold. I'll start today with a review of our guest cruise operations along with our third quarter monthly average cash burn rate. Then I'll provide an update on booking trends and finish up with some insights into our refinancing activity. Turning to guest cruise operations. It feels so great to be talking about operations again. We started the quarter with just 5 ships in service. During the third quarter, we successfully restarted ships across 8 of our brands. We ended the quarter with 35% of our fleet capacity in service. Our plans call for another 27 ships to restart guest cruise operations during the fourth quarter and the month of December. So on New Year's Day, we anticipate celebrating with 55 ships or nearly 65% of our fleet capacity back in service. For the third quarter, occupancy was 54% across the ships in service. Our brands executed extremely well. Occupancy did improve month-to-month through the quarter and in the month of August, occupancy reached 59% from 39% in June and 51% in July. Occupancy for our North American brands reflects our approach of vaccinated cruises which for the time being, does limit the number of families with children under 12 that can sail with us. Occupancy for our European brands reflects capacity restrictions such as social distancing requirements for our Continental European brands and a 1,000-person cap per sailing for some of the quarters in the U.K. For the full third quarter, our North American brands occupancy was 68%, while for our European brands, occupancy was 47%. Revenue per passenger cruise day in the third quarter 2021 increased compared to a strong 2019 despite the current constraints on itinerary offerings which did not include many of the higher-yielding destination-rich itineraries offered in 2019. As Arnold indicated, our guests…

Thanks, David. Operator, please open the call for questions.

[Operator Instructions] And our first question is from the line of Steve Wieczynski with Stifel.

So Arnold, in your prepared remarks, you -- I think I heard this right, but you talked about how you're expecting 2023's EBITDA should be higher than 2019's EBITDA. And look, I understand there's new net capacity in there that's going to help drive part of that EBITDA. But can you also help us maybe think about at a higher level, what some of your longer-term assumptions are in order to get that EBITDA level, meaning, how are you guys thinking about whether it's the pricing environment, load factors? Anything else you would point out that could kind of bridge that gap?

Sure. I'll make some comments and then give David a chance as well. By '23, again, if things continue to trend the way they're going, we should have the full fleet out. We'll have, as you mentioned, additional capacity with these exciting new ships, more efficient. We've got some cost infrastructure improvements. We're coming out leaner and with better cost structure. We're more efficient on the ships, both from a fuel standpoint as well as an operating standpoint. In addition to that, we expect to be back at occupancy levels more comparable to historical or potentially even better given the fact that while there will be some capacity growth at that point in the industry, it's going to be well below the capacity growth that would have occurred absent the pandemic. Go ahead, David, any additional comments?

Yes. I'd just point out a few things. So the 19 ships -- between the 19 ships that left the fleet, which Arnold indicated, are smaller, less efficient ships and all the new capacity coming in, we certainly have a much richer cabin mix on board the vessels. There's -- I think we had indicated the cabin -- the balcony cabin mix was about 6 percentage points higher. So that does give us the opportunity to generate more revenue. The combination of the ships we said before, those leaving the fleet and the new builds give us a unit cost at the ship operating level, a 4% reduction. On the fuel consumption, just the change in the fleet that I described is 3%. In total, it is a 10% capacity increase net of the ships that left the fleet. So with all of the pent-up demand and all of the things, the revenue management things, the bundle packages that we're offering, which is driving onboard revenue. And everything else we're doing, we feel, as Arnold said, that we have the opportunity for stronger EBITDA in 2023 compared to 2019.

Okay. Great. That's great color. And then second question, as we start to think about 2022, is there any way for you to help us think about how '22 is sold at this point? I guess what I'm trying to understand is how much of your capacity is actually available for sale at this point? And then how you think about opening up more capacity for '22 without ultimately impacting your pricing ability?

So...

Go ahead, David.

Yes. No, happy to. So for all intents and purposes, I think in most cases, we have announced the restart date for 71 ships out of the 95 that will be in the fleet in the spring of 2022. But even those ships where we have not announced the restart date in most cases, we have cleared the inventory for the dates that we don't expect to sail. And we are only selling at this point, the dates that we do anticipate sailing. We just have not made the formal announcement on the remaining 24 ships. But those will be forthcoming in the days and weeks ahead. So what is out there today, more or less, give or take, there may be some changes a little bit on the margin, but more or less what's out there today is what we're selling. We talked about the back half of the year being at a new historical high in terms of the book position. And we were very pleased with that. People are booking further out. And so we're seeing the benefit of that. The first half of the year, the only reason we didn't give a detailed year-over-year comparison of '22 versus '19 is because it is a bit of an apples and oranges comparison. While we are very pleased and look at the first half of the year and for the voyages that we're selling, we feel they're at the high end of the historical booking curve. The reason for the apples and oranges comparison is in the first half, we're not running most of the world cruises and all the long exotic voyages. And they tend to book much further out because they're much longer. So if we gave you the numbers, it would be an apples and oranges comparison. But it is fair to say that we feel very comfortable with the pricing and the book position for the first half of 2022.

But Steve, as I said in the prepared comments, we will have -- we're planning to have the full fleet on in time for the summer season where we make the bulk of our profits. So for the second half of '22, we're looking to be in full force. Go ahead, David, you have another comment?

Steve, if you just -- we -- 47% of our capacity will be sailing in the -- our capacity will be sailing in the fourth quarter. We end the calendar year we said with nearly 65% of our capacity. So during the first half of the year, we're going to go from somewhere around 60% on December 1, up to 100% at the end of the first half. So you can begin to see that the first half of the year is going to be somewhere in between that depending on the exact ramp-up of the capacity.

But to be clear, so if -- I'm going to make this up. So let's take a random -- let's take the Carnival Conquest, I'm going to make a ship up here. For the second half of next -- let's look at the second half of next year, are you selling 100% of that capacity today? Or are you still kind of holding back some of that capacity because you don't want to try to get up to that 100% level? And hopefully, that makes sense.

No, we're not for future voyages out there because, obviously, we're nowhere near selling out yet. Obviously, if we did, we would have underpriced it. We're not restricting the capacity that we're selling for the back half of 2022. There's no reason to it.

Our next question is from the line of Robin Farley with UBS.

I wanted to clarify your commentary on the expenses. I know you mentioned some expenses next year, obviously, would not be recurring the capacity out of service, the restart costs. And then maybe the piece that it is would be the enhanced protocols. So if you looked at only the period where everything is operating and so the restart expense would not be in there and the burn of ships out of service. For that period forward, and then I guess this would also mean for 2023, is it fair to say that your expense per passenger cruise day would be below 2019 levels when you exclude those sort of onetime restart costs?

Well, so...

Where I get -- go ahead, David. It's okay. Go ahead.

So when you exclude all of those costs and look into 2023, I mean, we had indicated that the benefit of the change in fleet was on the ship operating expenses was 4% per ALBD. We also have found efficiency shore side as well. And so there are cost efficiencies that we have. We're also -- as the whole world is, we are seeing some inflation. We're working hard to mitigate all of that inflation. We don't see it nearly as much as people in the United States in terms of the labor, given our employment base comes from nearly 150 countries around the world on board our ships. So we have a much more of an opportunity there. And so we're working hard, but I'd be hesitant to give guidance on 2023 cost structure. I think it's just fair to say to give you all the pieces that are out there and then we'll give guidance as we get closer.

Okay. Okay. No, that's helpful. So would you venture whether for 2022, whether the shoreside efficiencies would offset the inflation and enhanced protocols just for '22, if you exclude the -- if you get past the restart expenses?

Yes. I'd be hesitant to give guidance at this point. Clearly, the short side efficiencies will flow through. And since we're still working through all of the details relating to and sourcing and making changes and mitigating some of the inflationary costs. I'd be hesitant to give guidance. But you can be sure that we've got people focused on those items to optimize the situation.

Okay. Great. Helpful. And then my other question is just to clarify the commentary on price for next year. If we're just looking at the second half when it's a little more comparable. And then you said, excluding the future cruise credit discounts, the pricing is about in line with 2019 levels. I just want to make sure I understood when you gave your earlier commentary about how there is more bundling now. So more of what is being booked now for second half compared to 2019. Has more of sort of some of the onboard expense, right, kind of in the ticket price because of the bundling, if I'm understanding your comments right? And so I guess, I just want to clarify, when you are seeing price in line with 2019, is that sort of you have -- that after you've allocated some of the bundled ticket price on board? Or -- and then sorry, I guess I'm just trying to think about how comparable...

Yes. We've tried to normalize it and do some level of allocation to be an apples-to-apples comparison.

Our next question is from the line of Ben Chaiken with Credit Suisse.

Risk of getting overly granular, but I'll try it anyway. If you think about the profitability of the ships, if you think about the profitability of the ships coming online and your new capacity, over the next couple of years or whatever next 2 or 3 years? And then compare that to the remaining legacy fully, obviously, excluding the 19 disposed of ships. Is there any way to ballpark compare those 2 kind of like sets of assets, whether it's margins, EBITDA, revenue premiums, like that's something that's anecdotally talked about in the industry, but that didn't make sense. I can try it differently or we can take it offline.

No. We have rules of thumb about the overall benefit of new ships relative to the fleet. So, David, you might want to...

From a cost perspective, if you just look at the unit cost for the -- our new ships coming in, they tend to be 15% to 25% lower on a unit basis than the existing fleet. And from a fuel consumption perspective, we're talking more like 25% to 35% more fuel efficient on a unit basis. So we do see the enhanced profitability. And when you start adding in, of course, the better cabin mix, the more opportunity for onboard revenue because there are more -- there's more public space in the larger ships. So all of that does bode well for an improved return on the new ships versus the existing fleet.

Our next question is from the line of Jaime Katz with Morningstar.

Now the ships are starting to be deployed, do you have a little bit more visibility on CapEx demands over the next year or 2 that you'd be willing to share with us? I mean, I know we have the cash burn, but it would be helpful to hear the difference between maybe CapEx and OpEx going forward.

Yes. We can share with you our CapEx projections without a doubt. So looking at 2022, and I'll give you the 2 pieces of CapEx. The non-new build CapEx, we're projecting about $1.5 billion and the new build is $4.5 billion. So it's about $6 billion in total. Keep in mind, remember that most of the new build is financed with the export credits that are already committed. In 2023, the non-new build, we're forecasting about -- also about $1.5 billion, and the new build is $2.7 billion for a total of $4.2 billion. So we are expecting an increase in CapEx in '22 and '23 from where we are today in '21. But we're not expecting to go back. Pre-COVID, we had probably indicated a sort of a steady state CapEx of, call it, $2 billion, non-new build CapEx. And we do believe we'll probably get back there at some point in the future. But in the next 2 years, our best guess at this point is about $1.5 billion.

Okay. And then just going back to Robin's question on bundling. I'm curious whether you guys are thinking that the bundling behavior is something that's more secular. So over time, it's going to remain that the pricing component is less important than it was historically and that the onboard component is more important than it was historically. And I'm not sure if there's anything to read into that, but I don't know if it's a new secular trend or transitory?

Yes. Again, I think we have 9 brands. There's a lot of variability across the brands. And so we -- bundling has been around a while. It's not a new thing. But there has been a more recent trend that guests seem to prefer to have certain aspects of their experience bundled. And so there has been an increase in some aspects of that, whether that's an ongoing trend, probably, but we're going to stay flexible and dynamic and give the guests what they want.

And I think one is... if i can add to it, Arnold, what are the benefits of the bundle package? I mean it gives the consumer a choice. And any choices you give the consumer creates hopefully, more demand and better pricing in the long run. But keep in mind that when somebody bundles -- when somebody pays for like their drink package and they're in and ahead of time. Well, first of all, that, of course, benefits the agent because they get a commission on the whole package. So it definitely does make the travel agents happy. But when the people get on board, they really have a fresh wallet. And because they've already paid for certain items, so they have a fresh wallet, they're starting over again. And we believe that with the fresh wallet, it does incentivize more onboard spend in total. So we would expect our onboards to be higher in the long run as a result of the bundling, and we did see it in the third quarter. I mean the onboard and other per diems were up significantly compared to 2019. And so some of that is the fresh wallet of people getting on board.

Our next question is from the line of Assia Georgieva with Infinity Research.

I think you have been doing a great job and probably very happy to be so busy with restart. So congratulations. I had a -- my question is related -- again, Arnold, I think what you've done has been fantastic. And yes, good luck through the end of the year. My question was a little more in terms of sourcing and destinations. With the ships going back to warmer climates, including the Caribbean during the winter months, do you find any difficulties in terms of getting international passengers, especially from Europe with more stringent entry requirements into the U.S. And secondly, Australia seems to continue to be a wildcard, even though it's a small market, relatively speaking, in terms of the capacity you have there. But it's also a somewhat important market during winter.

Yes. Australia is an important market for certain and the travel restrictions absolutely play a part in terms of what we can do with occupancy ultimately. Now the encouraging sign is things continue to loosen up, things continue to improve. You can see in the U.K. where there's good momentum. They are further ahead on vaccinations, et cetera. You're seeing that U.S. recently made an announcement that you're fully aware of letting travelers from Europe come in and starting in November. But all of those things in the near term are impacting us for certain, and they will continue to evolve. Eventually Australia will open. Well, we'll be very excited about that and ready to take full advantage of it. And our team over there is working booking cruises going forward and so on in anticipation that you can see they will open. But the world is just processing itself through this pandemic. And as we said and as I said in the remarks earlier on the prepared remarks, it's choppy, but there's movements forward. And the most important thing is that there is pent-up demand, people are very interested in the cruise experience, not just repeat cruise stores, but we're seeing lots of new to brand and new cruisers booking. And so that's a very positive sign. But we do have to get to the point, and we will get there where it's kind of back to some kind of a normal where people are free to travel.

And if I can just add... Let me add some...

Go ahead, David.

In terms of your question about Europeans traveling to the United States for the Caribbean winter season, so keep in mind, we have multiple brands. And our European brands, essentially are home porting and other places in the Caribbean. So I don't remember every single home port. I mean, P&O in the U.K., I think home ports out of Barbados and [indiscernible] and other places in the Caribbean. They choose home ports where there's great airlift from their home countries. So most of the Europeans who are coming to the Caribbean are going on our European brands and going somewhere in the Caribbean to embark on their vessel. The North American brands, which are sailing out of the United States, the overwhelming majority of their guests are probably North Americans sailing on the board ships in the wintertime. So it's -- travel restrictions are easing. People are starting to be able to come. I won't repeat everything that you probably already know. But it's not as big of an issue for us as -- given the structure of where people start their cruises.

I think a comporting point that you've made is great, and I should have thought about that. And the second question, your yield management guys are probably working very hard because now they have even more levers to work with. So in addition to trying not to underprice and yet reaching occupancy levels where at the ship board level, at least, we're getting a cash benefit. Has there been any change, any restrictions in terms of occupancy? Or is it more a continuation of what you've been doing for decades trying to get the best price?

We've intentionally restricted occupancy for a host of reasons, some related and -- because, again, the brand's all over the place in terms of jurisdictions. So some just to be in compliance, in some cases, others to give a ramp-up to -- because they have new protocols. We have to get the crew experience with it and experience with the guests to make sure we work on [indiscernible] and some an artifact of the compliance measures, whether it's physical distancing or other requirements. And so at this point, yes, there's been intentional constraint. But as we said, where we have like normal cruises in the Caribbean, there's vaccinated cruises, but Carnival brand has been at 70% occupancy, which is fantastic given the number of ships they had in the protocols. And again, we intentionally tapped that. So as we begin to open up more, obviously, the yield management folks will have to sharpen their -- I was going to say pencils but nobody uses pencils anymore, jumping on their keyboards more and go to work on it. But it's -- we have good momentum. It's very disciplined. We have managed the timing of restarts of some ships thinking through these matters. And so it's a very proactive and to date, well managed relaunch giving us an opportunity to have strength in pricing going forward.

The whole process is obviously well above my pay grade, so I still use pencils.

Our next question is from the line of Brandt Montour with JPMorgan.

So David, I was wondering if you could maybe give us your view on how bookings cadence progressed throughout Delta, but just focused on sailings for the second half of '22. And then if there was a wobble at all, how did the industry respond to that in terms of pricing?

Yes. So as I said in my prepared remarks, the impact in August of the Delta variant on bookings. It's really much more of a near-term phenomenon in terms of, call it, the next 6 months, maybe 9 months of bookings. The further out you go, it is really hard to even spot or distinguish a Delta variant trend in the booking patterns. So the second half remains strong and throughout the month of August. And in terms of pricing, I think Arnold said this in his notes in his prepared remarks, we all believe that the Delta variant would -- we would get past this. And so our view was to maintain price and to make sure that we optimize revenue in the long run, not just bookings during the month of August, we still have plenty of time since we're ahead. We still have plenty of time to fill up the ships to the occupancy levels we're targeting for both the fourth quarter and for the first half of 2022. So we are holding price and we're in a good position.

Excellent. And then as a follow-up, I know you're targeting cash flow -- cash flow from operations breakeven sometimes early in '22, and I know that you didn't give a specific month on that, which we can appreciate. I'm just curious, what are you assuming in that for customer deposit inflows if anything, or it might still be elevated at that time. And so just curious what's baked in for that.

Yes. Well, customer deposits at the end of the third quarter were $3.1 million. The last 2 quarters, they did increase. Our expectation is that they will continue to increase. Of course, in a steady-state environment, remember that the overwhelming majority of the customer deposits at any point in time are the final payments for the next 3 months of cruises. So as the capacity for the next 3 months continues to build towards the 100% next spring, you should see an increase in customer deposits over time as you continue to get more and more final payments. Keep in mind, like for the fourth quarter, we only have 47% of the capacity in service, so there's only half of probably the final payments that you would see come next May. So you will continue to see an increase driven by that factor. And that should be a positive cash flow inflow to us over that time frame.

Okay. But maybe to ask a different way, do you need elevated customer deposit inflows to breakeven on cash flow from operations in the first half of next year?

I'll -- EBITDA will also break even in the early part of 2022. So it's -- I'd give you that hopefully answers your question.

Yes, that's helpful.

Correct, in a much more direct way.

Our next question is from the line of Stephen Grambling with Goldman Sachs.

Could you just talk about the pricing and booking dynamics between what you saw on Carnival versus maybe some of the other brands, specifically looking at second half '22 as itineraries normalized? Did you see any difference more recently in close-in bookings that may inform how that trajectory could evolve?

I would say to begin with, we see strength across the branded portfolio and that's very encouraging to us. But go ahead, David, with any specific comments you might want to make.

For the back half of '22, I mean, as Arnold said, all the brands are strong, things are going well. It's all the -- we're getting back to sort of a normalized comparison of full breadth of itineraries across the whole fleet. And so we feel very good about that. As I said, the back half of 2022 was at a historical high. And we saw great trends in all brands and on both sides of the Atlantic. So there's nothing particular to note there. Closer in, some of that is just a function of itineraries and marketplaces, but we are seeing good occupancy and across all the brands. I gave you the occupancy figures for the third quarter. Clearly, the European brands had more capacity restrictions in the third quarter. The U.K. restrictions go away, but the Continental Europe social distancing restrictions remain at least for part of the quarter. So I -- there's nothing worth noting. I think we're seeing good comparisons and good booking trends across all the brands. There are small differences, but some of that also has to do with itinerary length between the different brands in the marketplaces.

We'll take one last question, operator. Yes, I'm sorry, go ahead. This will be the last question. Go ahead.

I may have missed this, but I was wondering if you had any way you can quantify the potential kind of sustained structural cost increases that you have from some of the health actions. And as you mentioned, there are some supply chain disruptions. So I'm wondering if you can help frame kind of the level of inflation you may be seeing, whether it's in labor or commodities.

Yes. Real quick, I'll make a general comment. I think from a sustainable cost standpoint, a lot of the protocols, the start-up costs, of course, will go away. Lot of protocol costs will also go away because over time, the protocols won't be required. Once we get to a point where it's only protocol costs, those are in the hundreds of thousands versus per ship versus millions of dollars per ship or whatever. And again, we suspect that those will reduce over time as well. David?

Yes. I agree with Arnold. And I will tell you, I'm reluctant at this point to try to peg this because there's so many moving parts and variables and so many things we're working on that when we get closer, we'll have much better clarity, but there's a lot of opportunity out there for us. And you can be sure we're working hard to maximize those opportunities in every way with every supplier and every item we source as well as the labor and other things. So we'll give you more guidance as time goes on, but just recognize, we are clearly focused on this on an ongoing basis.

And thank you, everyone. We really appreciate your support and ongoing interest and we're very excited to be having the results we're having at this point. Thank you so much.

Thank you, everyone. Have a....

Operator?

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.